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Reconstruction 


F.  A.  VANDERLIP 

President 

The  National  City  Bank 
of  New  York 


AN  ADDRESS 
BEFORE 

The  Convention  of 

The  American  Manufacturers’  Export  Association 
October  31st,  1918 


Reconstruction 


The  dominating  fact  that  is  in  all  our  minds  is  that 
peace  is  coming.  The  last  gun  may  not  be  fired  tomor- 
row, but  some  tomorrow,  and  that  at  no  very  distant 
day,  will  mark  the  firing  of  that  last  gun. 

When  we  entered  the  war,  we  knew  little  of  what 
war  meant.  We  did  not  comprehend  the  gigantic  ef- 
fort that  we  were  to  make.  We  did  not  measure  the 
number  of  men  who  would  be  drawn  to  the  colors.  We 
had  no  conception  of  the  vastly  greater  army  that 
would  be  needed  to  support  with  supplies  and  muni- 
tions the  men  who  were  going  to  the  front.  And  now, 
perhaps,  we  do  not  estimate  truly  what  the  coming  of 
peace  will  mean,  and  have  not  measured  the  gigantic 
forces  that  must  be  diverted  from  war  work  to  the 
works  of  peace. 

It  has  been  estimated  by  a high  authority  that  there 
are  needed  six  and  one-half  persons  back  of  the  lines 
in  gathering  raw  material,  in  workshops  and  in  trans- 
portation for  every  man  who  wears  a uniform.  If  that 
estimate  is  correct,  there  are  eighteen  million  persons 
in  the  United  States  engaged  in  work  directly  relating 
to  the  prosecution  of  the  war.  With  the  coming  of 
peace  then  there  is  to  be  the  most  tremendous  transi- 
tion in  industry  that  has  ever  been  known  in  the  world, 
and  that  transition  must  take  place  almost  as  quickly 
as  did  the  mobilization  of  industrial  forces  for  the 
work  of  the  war. 

Some  comprehension  of  all  this  is  getting  into  the 
business  mind  and  it  is  interesting  to  note  the  business 
psychology  of  the  country.  We  see  a vivid  interest  in 


the  outlook  for  foreign  trade.  Men  have  noted  the 
great  increase  in  our  productive  capacity  and  recogniz- 
ing the  transition  which  must  come  and  which  at  prob- 
ably no  distant  time  may  start  overnight  with  great 
force,  they  are  naturally  beginning  to  give  considera- 
tion to  the  future.  They  are  wondering  if  their  prob- 
lem, which  now  more  than  anything  else  is  a problem  of 
obtaining  labor,  may  not  suddenly  turn  into  a problem 
of  obtaining  tasks  for  labor  to  perform. 

One  of  the  most  significant  results  of  the  war  to  us 
has  been  the  financial  changes  that  have  accompanied 
it.  In  the  period  from  its  outbreak  to  the  time  that  we 
ourselves  entered  the  struggle,  this  country  bought 
back  of  our  own  securities  held  abroad  about  two  and 
one-half  billion  dollars.  It  purchased  the  obligations 
of  foreign  governments  to  a total  of  some  $2,400,- 
000,000.,  and  now  since  our  entry,  our  Government 
has  loaned  our  associates  over  seven  and  one-half 
billions.  This  with  the  increase  of  foreign  bank  credits 
makes  a total  change  in  our  situation  measured  by 
about  twelve  and  one-half  billion  dollars. 

The  highest  estimate  of  the  amount  of  foreign  in- 
vestment in  this  country,  of  which  I know,  placed  the 
total  at  five  and  one-half  billions.  We  have  now  paid 
off  that  debt,  and  viewing  our  position  internationally, 
have  seven  billions  more  to  our  credit. 

The  first  great  trade  influence  that  we  are  likely 
to  see  immediately  following  the  declaration  of  peace 
is  an  insistent  demand  for  food,  for  raw  material,  and 
for  certain  manufactured  products.  That  demand  will 
be  so  insistent  that  it  must  be  met.  It  will  not  be  con- 
fined to  the  belligerent  countries,  for  the  war  has  dis- 
located commerce  the  world  over.  If  we  are  to  sell  to 
other  nations  great  amounts  of  our  products,  raw  ma- 
terials and  manufactures,  the  question  must  at  once 

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arise,  in  view  of  existing  international  financial  posi- 
tion, as  to  how  other  nations  are  to  pay  for  what  they 
need.  Whatever  is  bought  must  be  paid  for  in  some 
way.  A foreigner  cannot  buy  a knitting  needle  without 
in  some  way  providing  means  to  pay  for  it.  I know  of 
but  three  methods  by  which  a foreigner  can  pay  for  a 
purchase.  It  must  either  be  by  the  sale  of  goods  to 
us.  by  the  export  of  gold  to  us,  or  by  floating  with  us 
in  .some  form,  credit  obligations.  These  devastated 
countries  cannot  put  their  industrial  organizations  into 
shape  to  manufacture  any  great  amount  of  goods  for 
us  in  the  first  year  or  two  at  least.  Whatever  other 
difficulties  they  may  experience,  they  are  first  without 
raw  materials.  They  must  have  these  before  the 
wheels  of  industry  can  be  started  at  all.  Certainly  they 
have  not  the  gold  to  ship,  and  we  ought  not  to  demand 
it.  That  leaves  the  inevitable  conclusion  that  we  must 
absorb  foreign  credit  obligations  in  payment  for  a 
large  part  of  our  exports. 

The  tap-root  of  this  whole  question  of  foreign 
trade,  in  the  light  of  our  position  as  a creditor  nation, 
seems  to  me  to  run  right  down  through  the  capacity 
of  our  workshops  to  manufacture  and  the  efficiency  of 
our  labor  to  produce,  and  extend  on  into  our  ability 
as  a nation  to  finance  the  purchases.  Unless  we  will 
finance  them,  in  many  cases  the  purchases  cannot  be 
made,  and  so  your  ability  to  develop  a great  foreign 
trade  will  be  circumscribed  by  the  willingness  of  the 
country  to  absorb  more  foreign  securities. 

One  thing  that  the  war  has  shown  us  has  been  that 
we  greatly  underestimated  the  strength  of  our  financial 
position.  Our  savings,  our  ability  to  make  new  invest- 
ments, jumped  from  say  six  and  one-half  billion  dollars 
a year  to  a total  this  year  of  fifteen  billions.  We  have 
seen  the  greatness  of  little  things  in  business.  More 

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than  nine  hundred  millions  has  been  collected  in  small 
sums  by  the  sale  of  War  Savings  Stamps.  Our  capac- 
ity to  save  is  so  great  that  it  seems  clear  that  we  can 
probably  devote  a very  large  amount  of  our  savings 
to  investment  in  foreign  securities.  I believe  that  the 
total  is  not  less  than  three  billions  a year.  The  banks 
and  the  investment  houses  have  a great  role  to  play  in 
wisely  selecting  foreign  investments  and  intelligently 
popularizing  them  with  our  investors. 

We  are  facing  a time  when  there  is  going  to  be 
the  greatest  need  for  the  wisest  governmental  attitude 
toward  business  and  toward  this  whole  subject  of  re- 
construction. Are  we  to  continue  price  control,  or 
shall  we  have  freedom  of  competition?  If  foreign 
buyers  are  given  credit  and  are  permitted  free  access 
to  our  markets,  will  they  rob  us  of  our  raw  material 
and  leave  the  workshops  bare  and  the  workmen  empty- 
handed?  Should  the  new  League  of  Nations  take 
stock  of  the  whole  world’s  store  of  raw  material  and 
for  a time  ration  each  nation  according  to  its  needs? 
These  are  all  questions  of  tremendous  import  and  you 
should  have  well-considered  opinions,  for  we  cannot 
expect  to  have  the  government  have  sounder  judgment 
than  the  sum-total  of  public  opinion. 

The  problem  of  demobilization  is  going  to  be  one 
of  great  importance.  We  have  found  the  operation  of 
the  iselective  draft  to  be  on  the  whole  satisfactory. 
Should  we  now  have  selective  demobilization?  De- 
mobilization may  extend  over  a year  and  possibly  take 
two  years.  Should  the  selective  principle,  which  would 
bring  back  into  commerce  and  industrv  first  those  men 
best  fitted  and  most  needed,  be  applied  to  the  demobili- 
zation process? 

We  have  our  duty  towards  reconstruction  as  clearly 
as  we  had  our  duty  towards  the  war.  Let  us  continue 

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to  be  altruistic.  If  we  render  to  the  world  a great 
service  we  can  rest  easy  about  our  reward.  We  have 
a great  opportunity.  Let  us  see  what  we  can  make  of 
this  opportunity,  not  what  we  can  make  out  of  it. 

I wonder  if  you  manufacturers  appreciate  the  great 
obligation  that  lies  on  you?  What  is  the  one  thing 
above  all  else  that  might  prevent  present  conditions 
from  blossoming  into  wonderful  prosperity?  The 
answer  is  labor  troubles.  You  may  say  that  labor  is 
too  highly  paid;  that  labor  must  be  liquidated.  In  some 
instances  labor  certainly  is  too  highly  paid.  When 
riveters  and  caulkers  make  $200  a week,  as  some  do, 
they  are  out  of  line  with  the  rewards  that  others  re- 
ceive. But  it  seems  to  me  that  the  thing  we  must  try 
to  do  is  so  to  organize  industry  that  labor  will  produce 
enough  so  that  it  will  earn  what  it  is  getting.  The 
economic  service  that  you  are  rendering  your  country  is 
incalculably  great,  but  you  can  render  a service  to 
society  that  is  on  a level  with  the  sacrificing  service 
of  great  doctors,  or  of  men  of  learning  and  of  science. 
We  have  learned  that  there  are  things  greater  than 
money  making.  The  solving  of  this  problem  that  has 
always  been  with  us,  this  antagonism  between  capital 
and  labor,  would  be  one  of  the  greatest  contributions 
that  could  be  made  to  this  country.  And  you  have  the 
solution  largely  in  your  hands. 

I want  to  venture  to  voice  a solemn  warning  against 
the  danger  in  this  time  of  crisis  of  political  controversy. 
I believe  the  voice  of  the  people  should  be  heard  in  these 
days  when  the  questions  are  of  such  vast  concern.  I 
believe,  too,  that  public  servants  who  have  done  great 
tasks  well  should  be  trusted.  A great  task  has  been 
well  done.  Two  million  men  are  in  France  and  have 
turned  the  tide  of  battle.  Some  mistakes  may  have 

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been  made,  but  so  far  as  they  were  honest  they  can  be 
forgiven. 

But  the  problems  of  peace  are,  in  their  way,  going 
to  be  as  great  as  have  been  the  problems  of  war.  I 
am  not  sure  but  that  they  will  be  more  difficult.  We 
shall  need  the  wisdom  of  the  whole  people  to  solve 
them.  It  is  no  time  for  heated  partisanship.  We 
should  have  the  deepest  consideration  and  the  calmest 
judgment  applied  to  these  problems.  On  that  wisdom 
and  on  that  judgment  will  depend  the  welfare  of  count- 
less millions,  both  inside  and  outside  of  this  country. 


B4153 


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